“So many times you hear people saying, ‘Ah, somebody did something, I want to do that too.’ To me it’s really about what your niche is. Are you affiliated with a home builder? Do you deal with service personnel? Are you rural based? Are you a condo? What is it that you bring? What is your specialty? Picking the technology that helps you advance what you’re strong at it really what it’s all about and that’s really what we’re trying to do with the conference here, is to say, it’s not one size fits all. If it’s one size fits all, there’s one company. The whole point is, everybody is different.”
So said Rick Hill, vice president of industry technology with the Mortgage Bankers Association, during a conversation with Mortgage Media’s Dave Matthews at the MBA’s recent technology conference, in which they discussed the various tech-related issues and initiatives that have MBA’s attention and focus.
The high points of the discussion:
MISMO: At the conference, MBA chairman Chris George announced that MBA had decided to make a $2 million investment in the Mortgage Industry Standards Maintenance Organization (MISMO), seed money to allow MISMO to hire professional resources to help it more efficiently respond to the challenges of maintaining industry standards.
“We need to work faster,” Hill said. “The world is moving a lot faster than it used to and so MBA realized — well, probably late last year we started talking about it — that we needed to help the world move faster, help our industry move faster.”
This doesn’t change the process — the volunteers with MISMO still make the decision in concert as to standards. The professionals to be hired will serve in a support role, collecting and tabulating data and the like, supporting their activities. “The volunteers, the people who contribute are there. We need to help them so they can be the experts without having to do a lot of the administrative work,” Hill said.
And by making this financial commitment, Hill said, MBA hopes to set an example industry-wide for investing in MISMO and other important initiatives.
“We are hoping that other organizations see initiatives that are important to them decide that sponsorship is important so that they get more involved,” Hill said. “They bring their human capital, but also their financial capital to support things.”
And MISMO has been important to the industry — crucial, in fact, in the wake of the financial crisis. The standardization of data, the consistency, has been priceless what with all the new reporting regulations that arose in the aftermath of the crisis: Think of the cost, for instance, if Fannie Mae and Freddie Mac didn’t collaborate using MISMO, Hill noted.
“A lot of times folks will look at these things and say ‘well, there’s a cost.’ Well, what was the cost if it hadn’t have been there?” Hill said. “We talk about the $8,600 per loan that it costs. What would it have cost if every investor, every regulator needed a different proprietary reporting requirement?”
Private-label securitization: The vast majority of securities go through the GSEs — private-label securitization is a tiny market in the residential space. MBA and MISMO are looking into ways to promote growth in that area.
“We need to provide a new mechanism to get things out,” Hill said. “So one of the initiatives is really going to be helping in the private label space — specifically, an initial one is to standardize a data file if you will — that goes to the due diligence firms, to the rating industries, just to have some standardization across that. It’ll likely morph and get a lot bigger as we go forward, but that’s one that really has a lot of potential to really help the industry in ways maybe folks don’t think about MISMO.”
E-notary: Hill recalled closing on a house a few years back in a very rural area about two and a half hours from metro D.C. — he had to drive there and stay in a little country B&B because that’s all he could find. Remote online notary and similar initiatives can make such headaches obsolete, with notarization being done all through audio-visual technology, with the parties not needing to get together, Hill said. Say a spouse is in the military and away on maneuvers? She can still be part of the closing with e-notary.
Recognizing that notary laws are state rather than federal — meaning that there was the potential for 50 different sets of regulations as e-notary advances — MBA teamed up with American Line Title Association to come up with model legislation, created over a year ago. MBA is working the ALTA to advocate for adopting the legislation across the states, which has happened in 11 so far. “But it’s one thing to have legislation that’s hopefully common; you need regulation that’s common,” said Hill — consistent standards in authentication. MISMO recently put out its draft standards for public comment, Hill noted, with the hope that input from throughout the industry will help fine-tune them.
Uniform closing instructions: There’s been talk about aiming for uniform closing language — and that is highly unlikely, Hill and Matthews agreed. “Good luck with that,” Matthew said.
But forget uniform language — the important part is the content, the clarity, the template, the ease in finding the information needed, no matter the loan or lender.
“‘Not going to happen’ is the right phrase (regarding uniform language), and so we looked at that and said ‘Is that actually what we’re trying to do? Are we trying to get everybody to talk the same language?’ — and we realized that actually wasn’t,” Hill said. “We were trying to say, OK, what is the problem that causes difficulty for the title closing agent, the escrow, whoever is receiving things, and it was really more about where in the document to find something. So we said, ‘Let’s not think about the language, let’s think about the order of the content.’ Can we come up with a common template to say, ‘OK, there’s the contract information at the various parties,’ so that everybody — no matter who you work with, you know to go to page one, or page two or page three for that particular type of information.” The information, the clauses may vary from loan to loan or lender to lender — but where to find that information can be standardized and can promote efficiency and reduce errors.
Data privacy: Nobody wants data to be insecure, or used improperly, Hill said, and standardization is needed so there aren’t 50 different state laws when it comes to cybersecurity. But he’s hoping for some leeway, some industry management, in the regulations that come to pass.
“Today’s control may not work in two years as the world changes. We need the flexibility,” he said. “We don’t want to go back to a legislature two years from now and say, ‘can we please change how we control the access to write somebody’s data?’ That’s not what we want to do.” This is where tech expertise will be crucial — Hill said they need to hear from practitioners in order to formulate a stance to take back to legislators.
AI: The consensus among a panel at the MBA’s secondary conference last year was that at some point in the future, all loans will be underwritten using AI and you weren’t going to need the underwriters, Hill recalled. That may be overstating the case — Hill thinks that scenario, underwriting through AI, is certainly plausible and likely for “generic” or normal loans — where there’s a good credit score, the LTV is relatively reasonable, there aren’t wrinkles.
He thinks AI will be helpful in handling that type of loan — leaving the human underwriters free to focus on those that are less “generic.” The human underwriter can really become an expert: “I’m on this loan, I’m looking at this loan because it’s different. It’s a little unique. There’s something that’s not the norm. That’s really what you’re paying a human for, anyhow, is their expertise. So I think you really will see an evolution there of the role of the underwriter to really being that expert for a situation that’s not vanilla.”
Blockchain: Blockchain is a technology that holds a lot of promise, Hill said. “Blockchain, although sometimes it’s called trustless, the reality is it’s trying to create trust in the transaction by the way it operates,” he said. “So once something happened, and you can have access to it on a blockchain, you can trust that that’s accurate, or you can trust that everybody agreed to it.”
The trick is going to be meshing use of blockchain with current and future privacy laws, given blockchain’s very nature — the permanence of data. “Blockchain is, I’ve written something down and you don’t ever get rid of it. What does that mean, when I’ve got privacy that says I’ve got a right to be forgotten?” Hill asked. It’s a question that’s very much on MBA’s and MISMO’s radar as they look at potential privacy legislation.